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Everence update on Pennsylvania rate increase

An overview of HHS statement response

GOSHEN, Ind. – Everence is providing an updated response on the rate increase by the Everence Insurance Company’s ShareNet employer groups in Pennsylvania. This follows the Monday statement by the U.S. Department of Health and Human Services that the rate was “unreasonable.”

This non-technical update below helps to inform members and other constituents about the organization’s response:

How Everence set the rate

Everence did not set its insurance rate for small businesses in Pennsylvania with methods that inflated the true cost of providing coverage to their employees.

“Our products are built around having long-term trusting relationships with our small-business customers,” said Dave Gautsche, senior vice president of products and services. “Our goal is to help them manage the high cost of health care, not make it higher for them.”

The Everence rate increase was based on the trend of medical expenses in the health plan. Unfortunately, medical costs in Pennsylvania continue to rise as they do elsewhere nationwide. In recent years, Everence took losses on this health plan in Pennsylvania, yet it is not increasing rates above the trend of increasing claims costs.  The weight of medical coverage costs is already a significant financial responsibility for small business clients and their employees.

Different methodology used

The difference between what Everence says the rates should be and what HHS says they should be is a difference of methodology.

“HHS made their determination based on a different methodology than Everence did, which naturally led to a different result,” said Gautsche. “We continue to believe our methodology provides the best rate stability for our small group clients. It is based on our years of experience as a small insurer helping small businesses manage employees’ health expenses.”

Everence based the rate increase on a two-year experience period; HHS used a one-year experience period. As a small insurer with years of expertise in rating small groups, Everence has found that a longer experience period is a better measure for setting its rates. A one-year experience period may work for a large insurer; however, it would often result in unstable wide rate swings for the organization’s small business clients. Everence covers just below 1,800 individuals in its ShareNet plan in Pennsylvania. Nationally, ShareNet covers 5,000 individuals.

Using the two-year period, the loss ratio history in Pennsylvania has been approximately equivalent to the national ratio in the Everence plan. Understandably HHS did not come to that same conclusion because its methodology was different. Using one year of experience, the national ratio is not the same as in Pennsylvania.

Everence has applied this methodology in all its state rate filings this past year, and those states have all approved those rate increases.

Dialogue with Health and Human Services

Everence expected a normal regulatory review process as used by states. Everence did not have the opportunity to discuss HHS’s perspectives with them or methodology before the agency announced its determination.

“Everence regrets HHS made a determination on our rate increase in Pennsylvania before speaking to us,” said Gautsche. “States regularly talk to insurers throughout the regulatory review process. We suggest HHS consider adopting a similar step in their new review process.”

Everence supports the goals of increasing access and affordability of health care for everyone. As an insurer we take our responsibility seriously to help manage health care costs in ways that realize those goals.

See earlier rate increase response.

Everence helps individuals, organizations and congregations integrate finances with faith through a national team of advisors and representatives. Everence offers banking, insurance and financial services with community benefits and stewardship education. Everence is a ministry of Mennonite Church USA and other churches.

Everence offers banking products that are federally insured. We also offer securities and other products that are not federally insured and are subject to the loss of principal. All products are not available in all states.

Nov. 23, 2011